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Credit Repair After Divorce

If you’ve been married for a long time, there are many reasons why you may not have been paying much attention to your credit score. Post-divorce, however, you may realize you need to take out a loan for a car, home, or another purpose. And if your credit score isn’t great, you may have some trouble getting a decent loan.

While it’s possible to obtain a high-interest loan with a low or non-existent credit score, the best loans are only available to people with great credit reports and high credit scores.

Even if your credit isn’t great, however, there are steps you can take to repair it after your divorce has been finalized.  

Credit score basics 

A credit score is a numerical value that reflects the likelihood that someone would default on a loan. Individuals with higher scores are deemed less likely to default on a loan. 

The primary scoring models of VantageScore and FICO use a score range that extends from 300 to 850. If you want to apply for a home loan or car loan, you will likely need a credit score of at least 620. Higher scores usually lead to lower interest rates on loans.  

Your credit score matters because it serves as a guidepost for lenders. If your score is low, a lender may reject your loan application or offer a loan with a high-interest rate and poor terms. 

If your credit score is lower than you want it to be after divorce, it’s time to think about repairing it. This will make it easier to obtain loans in the future. 

Does divorce affect my credit score? 

A divorce itself won’t show up on your credit history or adversely affect your credit score. However, the circumstances of your divorce could indirectly impact your credit. 

For example, even though you’re divorced, you might still be liable for debt accrued during your marriage. This liability may be present even if the divorce decree states that your ex-spouse is the one responsible for paying off the debts. 

What does this mean? If your ex fails to make payments on time—even though the payments are their responsibility—your credit score could suffer.

How is debt settled in divorce?  

The most common types of debt that could apply to you and your ex include credit card debt, mortgage debt, and student loan debt

If you have a joint credit card or loan, any remaining debt will continue to be joint debt unless you pay it off in the near future.  

If you have joint debt following the divorce, you could be held liable if your ex-spouse doesn’t make the necessary payments on time. As mentioned, there are times when a judge will decide that one spouse is responsible for paying certain debts on their own. Even if this stipulation exists in your divorce decree, however, creditors would still seek payments from you. This could hurt your credit score.   

Can I open a line of credit or a credit card during my divorce? 

As long as you have a good credit score and are in a reasonable financial standing, you should be able to open a line of credit or credit card during your divorce. The most important thing to remember is to avoid opening a joint credit card or applying for a loan with both of your names.   

How do I separate my credit from my spouse?  

Your credit score is inherently separate from your spouse’s credit score. That said, some of your credit could be tied up with your ex-spouse if, during the marriage, you shared joint accounts or took out a loan in both of your names. 

Once your divorce has been finalized, you can take steps to fully separate your credit from your ex-spouse. First, close any joint accounts—bank accounts, credit card accounts, and other financial accounts. Do this as quickly as possible, and try to pay off joint debt as soon as you can.  

Keep in mind that the divorce decree may have assigned responsibility for paying off debt to one spouse. If you’re unable to close a joint account or pay off outstanding debt, speak with your card issuer or lender to convert to an individual account, if possible. This may be possible by making sure your ex-spouse is no longer an authorized user or account holder. 

Similarly, if your ex plans to use a joint marital account in the future, request that your name be removed from the account as soon as possible. 

How can I manage or repair my credit after divorce? 

There are several actions you can take to rebuild your credit score after divorce.

1. Locate a cosigner for loans

Your chance of winning a lender’s approval may increase if you find a cosigner willing to place their name on the loan alongside yours. As long as the cosigner has great credit, your application is likely to be approved. 

2. Obtain a secured credit card

Little by little, even small steps can help boost your credit score. It may make sense for you to obtain a secured credit card with a low limit. If you make a few small purchases on the card every month, your credit score will start climbing (as long as you pay off the card in full each month). 

After six months of making timely payments on a secured credit card, you may be able to advance to an unsecured credit card. 

3. Maintain a consistent payment history

Your payment history contributes heavily to your credit score. In fact, this single factor comprises 35% of your score. Unfortunately, a single late payment could drop your score significantly. Making payments on time can help increase your score each month.

Repairing your credit following a divorce can seem daunting, but it’s definitely doable. By taking a measured approach, you can start repairing and rebuilding your credit in next to no time.

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